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This is the Only Stock I’ve Bought in Months. And It’s a BEAST

by Darwin on January 2, 2013

I haven’t been a very active “trader” in the past few years; I’ve started to focus more on low cost investing (if you’re looking to save money on trading costs and get a $100 bonus to boot, OptionsHouse is the way to go-use link for promo code), the occasional market inefficiency trade (pairs trades, hedging gas prices, etc) rather than trying to beat the market with picking stocks since the reality is even the best and brightest in the world (while being paid millions per year) cannot do so over a prolonged period. As such, I’m the first to admit I’m a mere mortal and don’t focus much effort on individual equities like I did in my earlier days. However, occasionally, I pick up on a secular trend I see. This would be something larger than a typical “hot stock” or “tip”, but rather an emerging trend in society, a company with a lock on a truly innovative product or something along those lines. Examples include the 200%-500% gains I’ve made over the past few years in stocks like Apple (I sensed the iPhone would change the world, and it did), Netflix (back when they were the only game in town and before Reed Hastings drove them into the ground with dumb pricing and strategic decisions), Chipotle (when they were opening up stores on every corner) and BIDU (the Google of China). That’s not to say I haven’t had my fair share of losses to balance them out, but you get the point. If you pick some real game-changers, or even just one, it may well be worth hanging on to.

The Future is 3-D Printing

Starting this summer, I’ve been routinely tweeting about 3-D printing and how it’s a real gamechanger. I’m not going to rehash what I’ve written, tweeted previously and it’s all laid out much more eloquently here – Makers: The New Industrial Revolution. But I view this as a revolutionary technology that’s finally ready for the masses (“Rapid Prototyping” and 3D printers have been used in industrial settings for decades now but they used to cost 6 figures; now home hackers and high school science clubs are buying them for a few hundred bucks). All the time, I think of something that I’d love to have but isn’t widely demanded enough by the masses for someone else to have put it into mass production. Now, you can copy your kids’ friends toys, create your own tools, design your own jewelry, fix your own stuff rather than buying new again and they’re even making guns which is kind of scary (not just because they’re guns, but they probably don’t function very well for the owner just yet either). The bottom line is that the future is now for 3-D printing.

How to Invest in 3D Printing
Having seen this trend evolving earlier this year, I sought out the best publicly traded play on 3D printing and I came up with the aptly tickered DDD. I knew this was going to be big but didn’t feel like throwing a lot of money at it, so I did an out of the money call option. When the stock was trading at 31 in Jun, I bought a Feb. 40 call for 2.7. Basically, shares had to breach about $43/share to just break even with trading costs. But if I was wrong, it was only a couple hundred bucks. Well, I was right. Shares broke through $50 by December and I figured with the fiscal cliff pending, what the heck, I’d take some profits. So, I sold the call back for 11.5, a gain of 425% in half a year. Come New Year’s Eve, it became abundantly clear that Congress was going to make something happen, no matter how lousy. So, i just went long the stock for good. I intend on holding for years. Who knows, if it’s the next Apple, I’ll have another 4-5 bagger. If it’s just a fad or some other competitor comes in and wipes them out, well, those are the breaks. Shares were up 5% today alone – I like that as a first day return!

This is not a stock research article by any means. I’ve not even attempted to consider valuation, fundamentals, and the typical considerations that go into a more mature equity analysis. This is more trading on the concept and banking on execution. If you think this is just a media-hyped fad or the company is wildly valued, then it’s not for you. But it’s what I have my eye on right now. For more on my investing philosophy, check out how I beat the market using high yield stocks in my self-directed Roth IRA, why you should NEVER own your own company’s stock, low-cost and sector ETF trading at my dedicated site ETFBase and of course, the awesomeness of a Free account with Personal Capital.

3-D printing is hot as hell. I’m still unsure exactly how to invest in 3-d printing as an industry. I put it in the “too hard” pile since I couldn’t understand DDD’s acquisitions, and the technology is way over my head. Something makes me think they’re going to acquire anybody they can that has patents. Worst case scenario is that they patent troll and make a killing on every unit sold.

I’m really interested to see how this develops as a potential end user and beneficiary of technological change. There’s no doubt about it; the technology is really cool, and it saves a lot of time and money for the people who use it.

I’d be really interested in investing in any company that has a patent on the prevailing plastic/resin that the printers use. There has to be money there.

Admittedly, I’m not entirely sure DDD’s “fundamentals” are great; totally playing the name recognition since there are so few pureplay 3D printing publicly traded outfits. Up again today! (in a down market)